I used to edit Innovation Management. My book, "The Elastic Enterprise", co-authored with Nick Vitalari and described as a must read for companies that want to succeed in the new era of business - looks at how stellar companies have gone beyond innovation to a new form of wealth creation. I speak on new innovation paradigms.
I started my writing career in broadcasting and then got involved in the EU's attempt to create an ARPA-type unit, where I managed downstream satellite application pilots, at just the time commercial satellite services entered the market. I also wrote policy, pre the Web, on broadband applications, 3G (before it was invented), and Wired Cities.
I have written for many major outlets like the Wall St Journal, Times, HBR, and GigaOm, as well as producing TV for the BBC, Channel 4 and RTE. I am a research fellow at the Center For Digital Transformation at UC Irvine, where I am also an advisory board member, advisory board member at Crowdsourcing.org and Fellow of the Society for New Communications Research.
Google.com/haydn

Google On Earnings: Our Future Lies in Hardware Too

Google’s earnings have provoked mixed reactions in the major news media - Google’s core search business is under threat, said the New York Times, blow-out sales increase CNET told its readers – but one inescapable conclusion is that times are tougher when users switch from desktop to mobile.

Google’s revenues were slightly off expectations. And one of the reasons is the declining value of a mobile ad.

As C.E.O., it’s also superimportant to keep focused on the future. Companies can tend to get comfortable doing what they’ve always done, with a few minor tweaks. It’s only natural to want to work on things you know. But incremental improvement is guaranteed to make you obsolete over time, especially in tech.”

And those innovations are the radical adjacencies that Google shares in common with Amazon.com. Both companies are powering ahead with what I would call a “fluid core”. That is, neither allows its initial or current core success to dictate what it does next.

The emphasis yesterday on its innovation projects, Glass and automated vehicles in particular, is new for Google. In the past they have tended to treat these as part of its odd-ball culture and its ability to ride market reaction to what appear to be diversions from the core business.

Now Page is lining them up as a serious part of Google’s future. And what is telling about that, is the future looks like hardware.

To be very precise their future has the look of integration – infrastructure, hardware, software, services. But let’s stick to hardware for now.

To date, Google, in hardware, has relied on tweaking other people’s products – tablets, laptops and phones. But Page made reference to upcoming opportunities in unbreakable displays as well as improved battery life, as opportunities for Motorola Mobility.

However, the new Google Glass is a stand for something distinctly Google (though there are competitor products already on the market).

They need urgently to get momentum behind Glass before the new generation of flexible, unbreakable displays transforms the smartphone sector. And for that reason Glass is going to test Google like nothing before. They have a window of, at best, 18 months.

Analysts reacted to Glass, and the innovation story very positively – contrasting it with Apple’s lack of surprises in the locker. But that’s because they think Google has a free ride with Glass. It doesn’t.

Driverless cars present a different issue. When I talked recently (via email) with ex-BMW chief designer Chris Bangle he was doubtful about driverless vehicles simply because the liability issues it created needed to be resolved before the cars could go on sale.

Rather, he thought, cars that communicate with their environment – for example negotiating with a traffic light or with a parking space – would be as interesting and easier to implement. Google has the wherewithal to do it but seems to be naively pursuing a technology whose time is a decade away when there are gains to be had next year.

A further consideration in hardware is the Google supply chain. In the medium term I believe American companies will have to begin manufacturing again rather than relying on Asian suppliers.

The reason I say this is that manufacturing can now innovate at the speed of software, more or less. There is no longer a 2-5-10 year cycle in product, like there used to be. There is a lot of essential differentiation to be found in the product’s design and production process (and in being close to what comes next).

By the way, for all its design glory, the BMW of the 1990s and 2000s had one over-riding advantage. They had access to better metal shaping technology. Without its own investments in manufacturing BMW could not have reaped the design advantage that made it the darling of middle class America (and gave it healthy margins)

In the medium term analysts are going to care about the margins that Google reaps from products and Google is going to care more about how it designs for particular classes of user. To date Google has treated hardware as a gimmick but as it grows its design aesthetic it needs to reap more from these investments.

For all those reasons these are interesting times to watch Google and the testing times ahead for a CEO who has no hardware experience.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.

“To date, Google, in hardware, has relied on tweaking other people’s products..” “…a CEO who has no hardware experience.”

Google builds it’s own motherboards, servers, datacenters, network gear, and worldwide networks. You could say Google doesn’t have much experience with _consumer_ hardware, but internal-only products still involve the manufacturing and supply chain management you bring up as an issue.

One could similarly claim that Forbes management doesn’t have experience in commercial printing, but I would imagine that is quite false given all the magazines published over the years.

“Rather, he thought, cars that communicate with their environment – for example negotiating with a traffic light or with a parking space – would be as interesting and easier to implement.”

This has been technically possible for 50 years, yet it hasn’t happened. It’s a chicken-and-egg problem, and there’s no way we’ll get public dollars for smart highways before there are private smart carts to use them. We need a transitional technology first, such as the Google car.

This isn’t the first time this has happened either; modern cars would not work on the muddy dirt roads of the early 20th century. However the [transitional] Model-T did work, with its large narrow wheels and buggy-like track width. After the Model-T, roads were paved (or macadam at least; with Ford pushing for support), and cars could evolve to a modern layout assuming good surfaces.

thanks for the comment James – when you say Google “builds” do you men has plant that produces, plant that assembles? Curious to know.

Of course there is a world of difference between that and consumer goods, which is what I meant and should have been clearer about. Larry Page was dismissive of companies that tinker at the edges and to date in consumer goods that’s what it has done – we’ll see with Glass – btw I think it’s a great company but we should reserve our judgment on their hardware strategy until we see some significant revenue gains from it but I wish them well.

Larry was hinting that instead of just buying up other small companies and getting growth that way, Google is going to be building more business organically in places they see an inherent advantage and good margins. Retail Internet and cable TV services is just such a business. Alternative energy is another.

Google needs good ways to invest the cash that flows from their advertising platform, that gives good returns in the long run to keep their growth up. Web ads are pretty well saturated at this point. Buying startups has risks, not the least that you overpay. These organic businesses will help Google continue to grow long into the future.